Global Sugar Supply Surge Weighs on Prices as Dollar Strength Amplifies Pressure

Market Dynamics: Currency and Commodity Headwinds

Sugar futures markets are experiencing notable declines as multiple factors converge to pressure prices downward. New York world sugar contracts (SBH26) have retreated 0.05 points (0.33%), while London ICE white sugar (SWH26) dropped 1.20 points (0.28%). The primary culprit remains the strengthening US dollar, which reached its highest level in four weeks according to the dollar index (DXY00), creating headwinds across commodity markets including sugar.

However, market stabilizers are at work. Citigroup forecasts that commodity index rebalancing through BCOM and S&P GSCI will inject approximately $1.2 billion into sugar futures contracts over the coming week, providing some cushion against steeper losses.

Regional Production Dynamics: A Tale of Surplus and Shifts

India’s Production Boom

India has emerged as a significant supply driver, fundamentally reshaping the global sugar landscape. The India Sugar Mill Association (ISMA) reported a 25% year-over-year surge in sugar output for October-December 2025, reaching 11.90 MMT compared to 9.54 MMT in the prior year. ISMA subsequently raised its full-season projection for India’s 2025/26 production to 31 MMT, representing an 18.8% annual increase.

This production expansion has prompted policy shifts. India’s food ministry has authorized mills to export 1.5 MMT during the 2025/26 season, with the government signaling openness to additional exports to manage domestic surplus. The reduction of ethanol-designated sugar from 5 MMT to 3.4 MMT further unlocks export capacity, positioning India as a major market participant.

Brazil’s Record Trajectory

Brazil’s production continues its ascent despite earlier supply concerns. Conab raised its 2025/26 estimate to 45 MMT on November 4, while Unica reported that the Center-South region had produced 39.904 MMT as of November, a 1.1% increase. The sugarcane allocation toward sugar processing climbed to 51.12% in 2025/26 from 48.34% previously. However, Safras & Mercado projects a production decline for the 2026/27 season to 41.8 MMT (down 3.91%), with exports falling 11% year-over-year to 30 MMT, reflecting market concerns about future tightness.

Thailand’s Supporting Role

Thailand, the world’s third-largest producer and second-largest exporter, is anticipated to grow production by 5% to 10.5 MMT for 2025/26, adding further supply pressure to global markets.

Global Sugar Market Outlook: Oversupply Scenario

International forecasts unanimously point toward surplus conditions. The International Sugar Organization (ISO) projected on November 17 that the 2025-26 global sugar market will swing to a surplus of 1.625 million MT, recovering from a 2.916 million MT deficit in 2024-25. Global production is forecast to rise 3.2% year-over-year to 181.8 MMT.

The USDA’s December 16 report painted an even more bullish supply picture, forecasting global sugar production at a record 189.318 MMT (up 4.6% annually), while consumption is expected to rise only 1.4% to 177.921 MMT. Global ending stocks will decline 2.9% to 41.188 MMT despite the production surge.

Sugar trader Czarnikow amplified these concerns by raising its 2025/26 global surplus forecast to 8.7 MMT, up from 7.5 MMT in September—a significant upward revision signaling intensifying bearish pressures.

Regional Variations: Impact on Sugar Price in Pakistan and Emerging Markets

The global oversupply dynamic carries cascading implications for emerging markets. As major producers expand exports and global inventory accumulates, regions dependent on imported sugar—including Pakistan—face intensifying price pressure. The combination of record global production, aggressive export policies from India, and strong dollar headwinds creates a challenging environment for sugar-importing nations seeking stable pricing.

Price Implications and Market Direction

The convergence of surging global supply, accelerating export quotas, and currency headwinds suggests sustained downward pressure on sugar prices. While index rebalancing purchases provide temporary relief, the fundamental supply overhang presents a structural headwind for market recovery in the near term. Traders are monitoring Brazil’s policy developments and monsoon impacts on subsequent seasons, but the 2025/26 cycle appears firmly anchored in oversupply dynamics.